Retirement Planning for Young Adults: Why You Should Start Now

Hey there! I know that retirement might not be something that's at the top of your mind right now, especially if you're in your 20s. After all, you're probably more focused on things like building your career, paying off student loans, or just enjoying your youth while you can. However, the truth is that retirement is something that you should be thinking about – and planning for – as early as possible. In this article, I'll explain why retirement planning is so important for young adults, and give you some tips on how to get started.

Why Retirement Planning Matters for Young Adults (YOU!)

First, let's talk about why retirement planning matters in the first place. I know that retirement can seem like it's decades away, but the truth is that time flies by faster than you think. Are you aware that we just lost 3 years of time during the pandemic lockdown? And the sooner you start planning for your retirement, the better off you'll be in the long run. Here are some reasons why:

  • Longer Lifespans: People are living longer these days than ever before, which means that you'll need more money to support yourself in retirement. In fact, the average life expectancy in Malaysia is now around 75 years old, according to the World Bank. That means that if you retire at 60, you could be looking at another 15-20 years of life ahead of you. And you'll need to make sure that you have enough money saved up to support yourself during that time.

This is just a mathematical projection of Malaysia's population. You can notice that the newborn population is shrinking and the older age population is constantly increasing. Where are you in the year 2060?

  • Fewer Support Systems: Another reason why retirement planning is so important is that there may be fewer support systems available to you in the future. For example, government support for retirees may be limited, and you may not be able to rely on family members to support you financially. That means that you'll need to be self-sufficient and have your own retirement savings to fall back on. By the way, if the government does not support the older population but yet at the time, you might have your parents still living with you, who do you think will support them? Buying health insurance or medical insurance for your parent right now might be a wise choice. The premium might be high now, but it will be even higher when you are paying for the whole medical hospital bill. You can have a look at one of the medical insurance offered by Prudential Malaysia, PRUsenior med
  • Rising Costs: Finally, inflation and rising costs of living can make it even harder to save for retirement down the line. You'll need to make sure that you have enough money saved up to cover your basic expenses, as well as any unexpected expenses that may come up. A pack of nasi lemak that cost RM 5 now will be RM 12.14 in the year 2043.

Understanding Malaysia's EPF

So, now that you understand why retirement planning is so important, let's talk about how you can start saving for retirement. If you're working in Malaysia, you're probably contributing to the Employees Provident Fund (EPF). 

This is a retirement savings scheme that your employer and you both contribute to. The EPF offers some great benefits, like tax incentives and investment options that help your money grow over time. 

But here's the thing – the EPF alone may not be enough to support you in retirement. That's because the EPF has a minimum savings target that is designed to cover only basic living expenses. According to EPF, their savings target for retirees is at least RM240,000 by age 55. However, this may not be enough to cover all your retirement expenses. So, you'll need to start thinking about other ways to supplement your retirement income, like investing in stocks or property or starting your own business.

One thing that's really important to keep in mind when it comes to your EPF savings is that you should try your best not to withdraw from your account for non-emergency usage. Do you remember all the initiatives that the Malaysian government allow you to withdraw from your EPF account during the pandemic? That is really for emergency purposes. But it also has long-term impacts on the economy such as driving up the inflation rate.

While it may be tempting to dip into your savings for things like a vacation or a down payment on a new car, remember that every time you withdraw money from your EPF account, you're reducing the amount of money you'll have for retirement. Plus, you'll also miss out on potential investment gains, which means that your money won't grow as much over time.

Of course, emergencies do happen, and there may be times when you need to withdraw from your EPF account. However, it's important to try and build up an emergency fund separately, so that you don't have to dip into your retirement savings in case of unexpected expenses.

Sometimes we need to ask ourselves why we are always being pushed to an extreme whereby not enough to spend. A simple suggestion from me is that maybe simple budgeting will help you to reduce your emotional and financial stress every month.

Budgeting is just so important

Finally, let's talk about how you can start saving more money for retirement. The key is to start budgeting and planning your finances early on so that you can maximize your savings potential. 

Here are some tips:

  • Set a Budget: The first step to saving money is to know where your money is going. Set a budget and track your expenses, so that you can identify areas where you can cut back.
  • Start Saving Early: The earlier you start saving for retirement, the more time your money will have to grow. Even if you can only save a small amount each month, it's better than nothing.
  • Invest Wisely: Consider investing your money in stocks, unit trusts, or other assets that have the potential to earn higher returns than just keeping your money in a savings account. 
  • Seek Professional Advice: If you're not sure where to start with retirement planning, consider seeking professional advice from a financial advisor or planner. They can help you create a customized retirement plan that takes into account your unique financial situation and goals.


So, there you have it – why retirement planning is so important for young adults, and how you can start taking steps to secure your financial future. Remember, the key is to start early and to make saving for retirement a priority. By doing so, you'll be able to enjoy your golden years without having to worry about money. Good luck! If you have any other better suggestions, please let me know in the comment section.


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